FDIC Insurance Coverage

Over the last few years the FDIC insurance coverage has changed.  Do you know what is covered and how much coverage you have?  First, you should know that the Federal Deposit Insurance Agency (FDIC) is an agency of the United States government; therefore FDIC insurance is backed by the full faith and credit of the United States government. 

Keep in mind the FDIC Insurance covers your cash deposits at insured banks.  Most insured banks offer their customers additional products and services, and you should be aware that these products and services are not covered by FDIC Insurance.  The following items are not covered by FDIC Insurance even though you purchased them from an insured bank:

• Investments such as stocks, bonds, mutual funds, life insurance and annuities
• U.S. Treasury bills, bonds, or notes
• Safe deposit boxes and their contents
• Loyalty program benefits

What is covered and how much coverage do you get?  Each depositor has $250,000 of coverage per insured bank.  The FDIC insures your deposits at each insured bank.  Therefore, if you have $350,000 deposited at insured bank #1 and $150,000 at insured bank #2.  Your total coverage available to you is now $500,000 ($250,000 at insured bank #1 and $250,000 at insured bank #2).  In this example you only have $400,000 in coverage because deposits at insured bank #1 exceed the insurance amount by $100,000.  The FDIC insurance covers all deposits in checking accounts, negotiable order of withdrawal (NOW) accounts, savings accounts, money market deposit (MMDA) accounts and time deposits such as certificates of deposit (CD).

Thanks to the Dodd-Frank Act, all noninterest-bearing transaction accounts have unlimited coverage from December 31, 2010 through December 31, 2012.  The unlimited coverage is in addition to a depositor’s other account coverage held at an insured bank.  The unlimited coverage does not include Money Market Deposit Accounts (MMDA) and Negotiable Order of Withdrawal (NOW) accounts, even if they are not paying interest.   Be sure to check with your banking institution for accounts that are eligible for the unlimited coverage. 

/posted by Courtney M. Brown, CPA